As more and more satellites go up, delivery of packages to space has become a major industry. Many players exist in this space, but most remain private firms working to find their footing. Even Elon Musk's SpaceX appears years away from any IPO.
But on May 2, Rocket Lab USA (RKLB 0.27%) completed There and Back Again, a successful mission to test its Electron reusable rocket and helicopter recovery methods. As the company continues to grow and deliver since its Nov. 2020 IPO, here's why Rocket Lab may have the chops to be a definitive force in space logistics going forward.
Image source: Getty Images.
Space is big business
Space has become a growth industry, hitting $424 billion in 2020 on track for a $1 trillion valuation by 2040. While companies like SpaceX's Starlink deploy satellites to create constellation networks for providing internet service, many other organizations send up data retrieval, GPS, and service devices regularly.
As space services continue to grow, someone has to get those devices in place successfully. Rocket Lab touts 26 successful launches with its Electron launch vehicle, deploying over 146 satellites. The Electron isn't the only tool in its box, either. Rocket Lab has the Photon deployable space vehicle for handling already-placed satellites, and it's working in partnership with NASA on the CAPSTONE satellite, innovating new methods of satellite orbit and engineering.
The power of reusable rocketry
Successful development of reusable rocketry only makes the case for Rocket Labs stronger. Reusable modules and rockets offer a huge advantage in the turnaround time for space deliveries. Rocket Lab CEO Peter Beck says that getting one extra launch out of a rocket offers a "fantastic" way to double the company's rocket production without additional capital investment.
Satellite deployment provides Rocket Lab's proverbial bread and butter, and the company edged closer to profitability in recent reports, coming in most recently at a net loss of $0.06 per share in second-quarter 2022.
There are plans for even more Rocket Lab service options on the horizon. Many companies, including SpaceX, rely heavily on government contracts for space research and development (R&D), and last year the U.S. Space Force awarded Rocket Lab a $24 million contract for development of the upper stage of the Neutron vehicle. The eight-ton payload vehicle can carry the heaviest loads and leave both the atmosphere and the planet's orbit entirely. Reaching the moon is no longer out of the question.
Challenges of the final frontier
Space remains risky business, and high-profile test failures could erode public confidence in the company just as easily as successes can deliver hype. There and Back Again wasn't entirely a Hobbit's Holiday. The supposedly reusable module got dropped into salt water by the recovery helicopter and must be refurbished. But SpaceX's own headline-grabbing rocket crashes have helped the public understand that failures and complications are a necessary part of the testing process.
A major competitor could emerge -- but it probably won't be SpaceX. Its IPO still seems years away due to government contracts and its own mission to Mars taking precedent over any such moves. Most other space logistics providers lack the reusable launch vehicles and diverse toolkit available to Rocket Lab.
Space trucking may lack the star power of taking celebrities into orbit, as SpaceX has done, but it's likely to continue to be a necessary part of logistics in the future. That lack of "star appeal" may well explain why Rocket Lab's stock price has dropped 50% since its IPO. Big news might offer short-term spikes in that price, but Rocket Lab is in it for the long haul and has the tools to deliver over time.
Getting in before the big boom
Rocket Lab's current share price seems low, given its recent developments and the knowledge that space logistics is almost sure to continue to grow as an industry. Investing in the delivery of satellites and potential repositioning fees may offer less risk than betting on specific satellite manufacturers or service providers.
A U.S. Space Force investment in a company less than two years from its IPO is a strong signal of confidence. Look for more high-profile investments as Neutron rocket development continues, which might signal continued strength. With share prices at or near all-time lows as the world recovers from pandemic woes and deals with fuel and logistics shortages, now might be the time for space stock investors to bet on the future, on space, and on Rocket Lab USA.
